AC BidCo seen winning in-flight airwaves

26th May 2006

Private firm AC BidCo LLC is shaping up as the winner of a license to provide in-flight Internet service across the nation, bidding $31.3 million at an auction in which it has beat out rivals including a unit of Verizon Communications Inc according to Dow Jones news wire.The Federal Communications Commission auction has extended into a 76th round, but a bid placed by AC BidCo at the 37th round hasn’t been surpassed. As a result, it appears likely that AC BidCo, associated with private-equity firm Ripplewood Holdings, will be entitled to three megahertz of spectrum, enough to offer high-capacity Internet access during flights.

In-flight Internet service is available on commercial flights in Europe, but isn’t offered commercially in domestic markets. Companies have estimated that in-flight Internet service could be available in the U.S. starting in 2007, allowing airline passengers to use laptop computers, Blackberry devices, and possibly to make phone calls if regulators approve.

A unit of JetBlue Airways Corp. (JBLU) is currently bidding against a firm called Space Data Spectrum Holdings LLC for one megahertz of spectrum in the 800 megahertz band. That bidding war has been going on for several days.

The one megahertz of spectrum won’t be enough to provide high-capacity services on airline flights, but would be enough for communications with the cockpit, some bidders have said. It isn’t clear whether the winner of the smaller license will be permitted to team up with AC BidCo. The FCC is barring any one company from acquiring all of the spectrum sold off in the auction.

The airwaves sold in the auction include those currently licensed to Verizon Airfone Inc. Verizon Airfone must transfer its operations to just one megahertz of spectrum within two years. Its license expires in May 2010.——-